Legislation to establish a public policy and regulatory framework for the commonwealth’s energy sector is slated to be filed in the Puerto Rico legislature during the week of Oct. 15, Puerto Rico Senate Special Committee on Energy Affairs Chairman Larry Seilhamer told Reorg this afternoon.
Seilhamer, who is the point man in the Capitol on the development of the
legislation, noted that passage of the bill is a key hurdle that must be cleared in order to advance privatization goals at the Puerto Rico Electric Power Authority. Language in the
PREPA privatization law, enacted in June, bars the completion of any PREPA asset sale or concession until a new energy public policy and regulatory framework are adopted.
“We need to get this passed soon because we need to start the request for proposals process for PREPA’s assets,” Seilhamer told Reorg.
The Senate vice president signaled that the bill could not wait for a
“blue ribbon” task force to present its final findings for the island’s energy grid, public policy and regulatory framework, a step that is not expected until December.
“I’ve let it be known that the legislation can’t wait an additional 60 days or so,” Seilhamer said.
The PREPA privatization law, Act 120 of 2018, established that the energy public policy and regulatory framework would be approved by the legislature within 180 days of the law’s enactment. The legislation required the creation of a working group to develop the energy public policy and a regulatory framework. It also called for the naming by the Southern States Energy Board of a blue-ribbon task force to advise on policy. The SSEB is advising about the island’s energy policy under a commission by the U.S. Department of Energy.
Senate Minority Leader Eduardo Bhatia, who is working closely with Seilhamer on the pending energy sector bill, signaled that the legislation would require a rapid ramping-up of PREPA’s use of natural gas to meet federal environmental standards and to cut costs.
Seilhamer spoke with Reorg at the Capitol following a committee hearing on the impact of Jones Act shipping restrictions on the island’s use of liquefied natural gas. The federal law establishes that only U.S.-built, -flagged, -owned and -crewed vessels can carry cargo between U.S. ports.
Seilhamer acknowledged that the bill would call for more liquid natural gas use over petroleum to fire PREPA’s plants but said the legislation could not wait for a Jones Act exemption, which is strongly opposed by the U.S. shipping industry. The senator pointed to U.S. Department of Energy and Mississippi Gov. Phil Bryant as potential allies in a push for a limited Jones Act exemption.
In prepared testimony before the special Senate committee, PREPA CEO José Ortiz
reiterated that an exemption from the Jones Act for LNG shipments was essential for the utility to be able to maximize its use of abundant U.S. natural gas. He said the exemption could be temporary until a sufficient fleet of Jones Act-compliant LNG vessels that can meet Puerto Rico’s demand is launched into service.
Savings on LNG purchases are tied to long-term contracts that lock in lower prices, Ortiz said. “In light of the current lack of Jones Act-compliant vessels with the capacity to meet the volume required by PREPA, long-term contracts with foreign suppliers of LNG will be formalized,” he said in the written testimony.
A PREPA official delivering Ortiz’s testimony, generation manager Daniel Hernández, cited estimates that a Jones Act waiver on LNG shipments could cut costs by up to 30%, representing some $500 million in annual fuel purchase savings across the utility’s plants.
The testimony took aim at the position of U.S. shippers that Jones Act vessels can meet the island’s LNG demand using International Organization for Standardization, or ISO, tank containers. PREPA noted that the largest 40-foot ISO container can carry 43.5 cubic meters of LNG. The utility said units 5 and 6 at its San Juan generation plant alone require a minimum of 94,000 cubic meters per month, which represents the haul of 2,175 40-foot ISO containers.
“That’s without considering other generation units expected to use LNG, including at Palo Seco, which would drive up the volume considerably,” according to Ortiz’s testimony. “Such volume cannot be supplied in a cost-effective and reliable manner in ISO containers.”